When to give up on an ETF (FILL)

[voidstar]

Ok, I put about 2% of my portfolio into FILL at the beginning of 2018. Things haven't been going well for it.

FWIW, I did have other allocations into FUTY and FENY, which I can't complain there (FUTY is +37% for me, and FENY is over 6-7% returns).

FILL is now down for me to -25%. I've read maybe to give up at a loss at around 20%. I "survived" the 2008/2009 loses of 40% by just hanging in there, as the market bounced back in (roughly) 2011.

With all the excitement on Tesla, and sell signals on Exxon (which is 13% of FILL -- it's a note complaint that they are top heavy on large caps, by 88%). They have 208 holdings.

So, why did I jump into FILL ?

I've been doing fine with mostly ITOT, MGK, SPTM.. But then the notion of spreading out a little, covering more of the energy sector and non-US markets. FILL does both -- and maybe it is just in a slump with things like Brexit, Asian trade issues, etc. Who knows.

I don't really want to derail this into why nobody around here should ever consider focused ETFs. I mean -- the US market *could* tank anytime (not likely!), and fundamentally people still need energy. FILL is still over 5% returns at least.

Maybe here's the question: are Morning Start ratings crap? Because MS still gives FILL high marks. Maybe that's the problem with all those kind of analysis: they're golden, until they're not. XTF gives FILL a crap rating right now, so maybe MS analysis is just lagged?


I'm ok with riding FILL into the ground (with 209 holdings, I don't think it'll get that bad). But as the only RED in my reports, it sticks out like a sore thumb. I suppose it's where compound interest by re-investing its dividends is suppose to help out, while I'm accumulating during this down period.


I know there is no single answer here - if Lithium or solar is identified to cause cancer tomorrow, then gas and oil won't be looking so bad after all! But maybe that's not likely either. I hate to react to contemporary perceived problems - but down -25%.


Just curious on opinions here... Does the "call it quits at -20%" have merit? Or just stick with strong hands and ride it out? (I've still got 10 years till retirement!) Do both, and ditch half?

 

[DrRoy]

When in doubt, sell half.

 

[bluewater23t]

I am by no means an expert, but I'd cut bait now, and put that money to better use. Likely make it back or better in a different fund.

 

[VanWinkle]

If this is in a taxable account, tax loss harvesting is the way to recoup some of the losses. Reinvest into something else(could not be one of your other funds if you have been reinvesting dividends) and harvest the loss of cap gains for next end of year taxes. Make a negative into a positive.

 

[corn18]

Would you buy it today? If not, sell it.

 

[UnrealizedPotential]

I have bought investments in the past and wondering if I should stick it out or sell it. I end up selling when it became obvious I was wrong. I like to have a good reason to own something and not just because it's cheap or because I don't want to sell it when it's down.

If I can't figure out why I own it , I sell it.

 

[LOL!]

I always sell losers before I have owned them more than 12 months, so that I get the short-term capital loss. It helps me avoid LOSS AVERSION. Since it is a rule, I don't have to ask others about what I should do.

As for energy, I read that the USA is getting more efficient in that area and using less and less. It is not a growth industry.

 

[capjak]

I guess I would share my loss with the government by Tax Loss Harvesting (TLH).

Sell equal amounts of your loser off set with a winner and buy another TSM etf that would not disqualify the TLH to keep asset allocation the same.

 

[Sunset]

Be happy you don't have XLE in an IRA

 

[Running_Man]

Ok, I put about 2% of my portfolio into FILL at the beginning of 2018. Things haven't been going well for it.

FWIW, I did have other allocations into FUTY and FENY, which I can't complain there (FUTY is +37% for me, and FENY is over 6-7% returns).

FILL is now down for me to -25%. I've read maybe to give up at a loss at around 20%. I "survived" the 2008/2009 loses of 40% by just hanging in there, as the market bounced back in (roughly) 2011.

With all the excitement on Tesla, and sell signals on Exxon (which is 13% of FILL -- it's a note complaint that they are top heavy on large caps, by 88%). They have 208 holdings.

So, why did I jump into FILL ?

I've been doing fine with mostly ITOT, MGK, SPTM.. But then the notion of spreading out a little, covering more of the energy sector and non-US markets. FILL does both -- and maybe it is just in a slump with things like Brexit, Asian trade issues, etc. Who knows.

I don't really want to derail this into why nobody around here should ever consider focused ETFs. I mean -- the US market *could* tank anytime (not likely!), and fundamentally people still need energy. FILL is still over 5% returns at least.

Maybe here's the question: are Morning Start ratings crap? Because MS still gives FILL high marks. Maybe that's the problem with all those kind of analysis: they're golden, until they're not. XTF gives FILL a crap rating right now, so maybe MS analysis is just lagged?


I'm ok with riding FILL into the ground (with 209 holdings, I don't think it'll get that bad). But as the only RED in my reports, it sticks out like a sore thumb. I suppose it's where compound interest by re-investing its dividends is suppose to help out, while I'm accumulating during this down period.


I know there is no single answer here - if Lithium or solar is identified to cause cancer tomorrow, then gas and oil won't be looking so bad after all! But maybe that's not likely either. I hate to react to contemporary perceived problems - but down -25%.


Just curious on opinions here... Does the "call it quits at -20%" have merit? Or just stick with strong hands and ride it out? (I've still got 10 years till retirement!) Do both, and ditch half?

Still a little unsure of why you bought this other than the international exposure and the need of energy will continue. Basically there are the 5 largest multinational oil companies in the world that make up 50% of the index so this ETF is in reality a 5 company ETF of large mutlnational oil companies. Most of these companies are performing worse than Exxon Mobil which has seen an average drop in earnings of 8 percent annualized over the last 10 years.

https://research.valueline.com/api/report?documentID=2185-VL_20191129_VLIS_XOM_996_01-3GFJKIB0UUMOLBKT7BRCL7CMSG&symbol=XOM


Chevron is worse than Exxon Mobil losing 20% per year for 5 straight years from earnings while the share price, sales 60% of 2011 levels with single digit earnings on capital employed and 80% of profits paid to dividend with a rising share price, Chevron is a hot mess and I would not be investing in that company for years to come. I would sell immediately myself. You would do better by buying the top 5 oil companies in a percentage equal to the fund and avoid the high maintenance ETF fees.

https://research.valueline.com/api/report?documentID=2185-VL_20191129_VLIS_CVX_685_01-63K1UA0AE13NQVM4PF7RVM8IHO&symbol=CVX

 

[OldShooter]

@voidstar, there is nothing wrong with FILL. You placed a bet on a sector and the bet didn't pay off. You bet red and black came up. The only way to avoid losing money on sector bets is to not make them. If you are not familiar with the Callan "quilt chart," spend some quality time with one. You will see that sector performance is pretty much random and unpredictable. Decisions on getting in and on getting out of specific sectors are attempts to predict the unpredictable.

There is nothing "wrong" with Morninstar "star" ratings either, though they are widely misunderstood. Morningstar divides funds into 64 categories and, within each category rates the funds' past performance. Within the poorest performing category, the best 10% of funds get five stars. Within the best performing category, the best 10% get five starts. Among people who pay attention to this stuff, the stars are well known to not be predictive. In IIRC late 2017 the WSJ published a study that showed this yet again. Morningstar responded by basically agreeing with the WSJ results and claiming "we never said that they were predictive." So what are the stars good for? Basically nothing. But the stars are exactly what Morningstar claims them to be, so nothing "wrong."

 

[voidstar]

In my case, it is in a tax deferred account - but still good advise on the tax harvesting. But I've got time here, no sudden movements


To clarify and expand upon the thought: I think in early 2018 FILL had a bit of a pull back, so it looked like a reasonable timing to me. And, over that following summer, it was a decent play. It's just, FILL hasn't recovered from the October-ish collapse of 2018. A lot of things have recovered from that. If stocks were modeled as a 400m sprint as a year, Oct 2018 was like all the runners got blown over, and FILL is still on its back catching its breath.

My journey has been allocating >90% to fairly aggressive growth for over a decade (a very lucky decade, they say). Now getting older and slowing down a bit, I decided to throttle back to 80% aggressive, 10% to a little less aggressive (more blended), 5% to various bonds and yield earning options (e.g. BTO, BPR, CIF, CHI type stuff - I count FUTY in here too), and yes - gamble the other 5% to various ETFs (e.g. FTEC, SOXX did well, but this FILL did not). A regret might have been making those changes all at once, rather than like 1% adjustment every few months (although in defense -- back then, they had a thing called Commission Fee's, so it was my habit to only monitor things once a year).


Anyhow, back to FILL: I suppose my thinking was that with all the deep pockets of (old and large) energy companies -- yes, an assumption on my part -- they'd be pivoting themselves to adapt to future-looking energy production (lithium mine real estate? solar efficiency patents?). That was the gamble, but a poor gamble since large companies just aren't that nimble. At the moment, the action is Tesla/Panasonic - and it's pretty cool Tech, but there are challenges to our national power grid in scaling that up to millions of cars. But at the same time, we see continuous expansion of "solar cities" and "wind farms" - is it enough (to scale to millions of EVs)? Or will coal and oil be the backend provider of all those Tesla Charging Stations?




I'll think it over some more -- FILL dividends are only twice a year, so I'm not necessarily buying into these interim lows. But for the question of "would I buy it today" - Hmmm. Short answer is No, it's not a composition that interests me knowing what I know now. But -- if you wanted what is probably a reliable 5% yield on something that is fairly down on its recent moving average, I might perceive it being not a horrible time to give FILL a try (being almost near 2016 lows!).




Thanks for the reminder about Callan tables! It's amazing all the tools we have now to slice data (finviz.com is a lot of fun to me), as people continue to try to find patterns in all this noise

 

[OldShooter]

... people continue to try to find patterns in all this noise

Exactly! Evolution has given us human animals exceptional skills in identifying and reacting to patterns. It is a survival skill. It would be overwhelming to deal with every situation ab initio.

Unfortunately this skill causes us to constantly seek patterns, sometimes seeing patterns in random data. IIRC Nassim Taleb discusses this in one of his books, but I am too lazy to chase the reference in my library.

Another thing evolution has given us is optimism and overconfidence in our skills. For example, the fact that 80% of us consider ourselves to be above-average drivers.

When optimism and pattern-seeking meet Mr. Market, both good and bad things can happen.

 

[triangle]

Based on your opening post, I would probably stick with it. Some sectors and companies go up and others go down. Unless you believe that fossil-fuel consumption will not continue to increase or that so much supply is available that it will depress profit margins for many years. It is impossible to predict what will happen from here, and it might provide some downside protection if the market decides to sell off this year.

If you like volatility then you could buy a lithium producer. Albemarle Corporation (ALB) went up 10% a couple of days ago in sympathy with Tesla, only to fall back more than 3%.

 

[voidstar]

Just to follow up - I have decided to stick with it (on FILL). BUT - someone else made a comment about recouping the losses elsewhere: I did that too. I *accidentally* got out of TSLA at 350 (a Stop Loss accidentally got put in as a Limit....) but then got back in at 650 with a little reshuffling. Needless to say, at least on paper I've more than doubled on the losses I had on FILL. I recognize it was another gamble, which means it could have just as easily gone the other way [ and still could -- TSLA still on a rollar coaster ]. I generally don't go for individual stocks, but this NoCommissions things kind of changes the game a bit. But as a reminder, I'm only talking 2% of a total portfolio here [not sure if there is a specific portfolio amount where diversification across Continents starts to make more sense].



Now, why I'm sticking with FILL: two things. [1] Similar to what "triangle" was saying -- money flows across these markets. It's mostly zero sum gain here - which means for me, or any sector/market, to "win" someone else has to "lose." Hence that's the idea: if the US market starts to tank, the money is then flowing to somewhere else -- which mean mean *NOT* US markets. It's not bulletproof (e.g. the "elsewhere" might be Crypto instead of Europe or China, who knows -- I tend to think it may go to cash, which means it goes into Consumer Goods and Real Estate...), but that's the thinking of this kind of "diversification" anyway.


But also [2] studying FENY and FILL recently, those *both* gave substantially larger dividend payout at the end of last year (like 2x or 3x above what they had given out for many years). I've seen this a couple times before (with other funds) -- and it seems to me that more likely when this happens, that fund continues to decline for awhile. I'm generally setup to automatically re-invest dividends -- which re-invest at the price around the time of those dividends.

So this got me thinking: Generally it's nice to re-invest dividends, that's the wonderful thing about compound interest and all that. And it's a convenient feature, where a lot of things indicate that reliable investing is more hands off. But it seems to me -- they need a feature where if the dividend payout is orders of magnitude different than normal, some kind of alert or choice should be offered. My current favorite place to lookup dividends is dividendchannel.com -- lookup XNTK at end of 2018. They gave $17 DOLLARS per share, where normally/historically it was about $0.20 cents per share. That stands out as something significant probably happened. I want a feature like: "reinvest dividend if the divdend payout is within +/- 50% of the last 10 year average, otherwise don't and do e-mail me".


OldShooter, don't shoot me! Not saying there is a pattern here. But I am saying that eventually after enough Growth, there comes a time when you may want to start micromanaging your dividend reinvestment options a bit more closely. It does seem logical to me that if a fund is about to give an unusually higher dividend at some point, something is going on... I'm certainly not experienced or savvy enough to know what all is really happening in those situations, I'm just a typical retail investor. But I don't think there is anything wrong with FILL - though I do think FENY is better (and I may migrate towards that direction over time).


In hindsight of just the past few weeks - sure, moving *all* of FILL into TSLA would have been a better play. But have to ignore that temptation - that line of thinking leads to "well let's just move everything into X" and then getting devestated when a chase strikes out.



NOTE: I'm able to Self Manage 75% of my 401K. It can be nerve wrecking being in the driver seat of a fund -- typically one can just turtle along and be just fine. But I do wish I had exercised this option sooner, so food for thought to younger investors out there.